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Monday, December 13, 2010

Update for 14th December 2010

  Nifty Future Recovers Further, But Resistances Still Remain ! 

The last post indicated that "last Friday's green candle with it's open below the previous candle's body and a close which was above the 50 % mark of the previous red candle's range indicate the support at lower levels and even a short term reversal." It was also reported that the overhead resistances remain at the 6030 and 6090 levels and until these resistances are broken, the pattern of higher high, lower low and lower high may remain. Nifty futures opened on Monday with a freak trade at 5985, even though the actual opening rates were exactly 100 points lower at 5885, near the previous day's last traded price.  Since Nifty futures never actually traded up to the freak rate of 5985 on Monday,  the daily high  stands corrected to the actual high of 5940. All charts on this site are prepared using the corrected open and  high prices and therefore, these charts may differ from other automated charting services. The intra-day chart of Nifty futures also shows the open at the 5885 area.



  Nifty Futures - Intra-day Chart     




Nifty futures opened between the reference rates of 5860 and 5900 and the trading in the first hour also remained inside this range. Since the contract could not advance beyond the top end of the opening range, market tried to test the lows. The test of lows turned out to be a mini sell off which even  reached a low  of 5797 within a short time. After recording this low, the trading range remained narrow between 5800 and 5830 in this phase of trading. However, market was already indicating better internals by way of a very positive advance decline ratio right from the morning even when the pivotals and Nifty futures were trading with losses. By the time the European markets started trading in the positive territory, Nifty futures started the day's recovery. Once it broke above the 5830 level, it rallied almost vertically and reached the 5900 area very easily. The rally continued at a slower pace to  reach almost the 5940  reference level in the last half an hour of trading. The last trade was at 5932. As the Nifty future is still trading inside the previous trading range, the previously indicated reference levels  also remains  valid and are at 5830, 5860, 5900, 5940, 5990, 6030 and 6090.

Nifty Futures - Daily Chart        


In view of the late momentum exhibited by the market, Nifty future may try to test the higher reference levels on Tuesday. However, firm closes above the 5100 levels are required to confirm the possibility of a retest of the all time highs. 


 Nifty Options  Scene  

The Put Call Ratio ( PCR ) has further  improved to 1.22 as on Monday on the back of the recovery. Significant put option writing was seen at the strikes from 5400 to 6000 on Monday. Additions to the call option open interest ( OI )  was seen at the 6000 strike. However, call option OI decreased at the strikes at 5800, 6100 and 6200.  The India VIX  or the volatility index which shows the implied volatility ( IV ) of the Nifty options, closed higher at 22.57.

Nifty Trailing Fundamentals 


Nifty trailing valuations also increased on the back of the recovery. The trailing Price Earnings Ratio  ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index  were at 23.58,  3.72 and  1.06 as on  13th December 2010. ( More information and analysis on Nifty historical valuation is available from the "Nifty Fundas" page ).    


Latest Ultimate Momentum Signal


The updated Momentum Signal spreadsheet showing the latest signal values of the current month Nifty future and the Nifty index is given below :



Nifty index, BSE Sensex and the Nifty futures have closed with neutral Momentum Signal values of -30 as on Monday.  As indicated in the previous post, the last sell signal has turned out to be a whipsaw. 

Projected Momentum Signal Close Values

The projected levels of Momentum Signal values applicable to various ranges of closing values of the current month Nifty Futures, Nifty Index and the BSE Sensex,  as at the close of next trading day, ie. as on  14th December, 2010, are given in the following table. All readers are requested to take note that the table below is just a ready reckoner for the next day's Momentum Signal values and the figures are not intended to be interpreted as any targets for the Nifty futures or indices shown therein.  
 
 
Please click on the table to enlarge. For more info on the above table,  please click here.

Readers are requested to go through the Risk Factors, Risk Analysis, Position Limits and FAQs pages of this blog to gain a reasonable understanding of the trading system. Please do post your suggestions and comments on how this blog can be made more useful.
 
Cheers and Prosperous Investing and Trading !!!

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